Perpetual Option - XPO

AAA

DEFINITION of 'Perpetual Option - XPO'

A non-standard financial option with no fixed maturity and no exercise limit. While the life of a standard option can vary from a few days to several years, a perpetual option (XPO) can be exercised at any time. Perpetual options are considered an American option; European options can be exercised only on the option's maturity date.

Also referred to as "non-expiring options" or "expirationless options."

INVESTOPEDIA EXPLAINS 'Perpetual Option - XPO'

For investors, perpetual options represent the highest ratio of possible risk/reward payoff compared to existing financial products. Perpetual options are viewed as "plain vanilla" options. For many investors they represent an advantage over other instruments (where dividends and/or voting rights are not a high priority) because the strike price on a perpetual option enables the holder to choose the buy or sell price point instead of having to select a singular stock price. In addition, XPOs can be preferable to standard options because they eliminate the expiration risk.

RELATED TERMS
  1. European Option

    An option that can only be exercised at the end of its life, ...
  2. American Option

    An option that can be exercised anytime during its life. American ...
  3. Risk-Return Tradeoff

    The principle that potential return rises with an increase in ...
  4. Plain Vanilla

    The most basic or standard version of a financial instrument, ...
  5. Risk

    The chance that an investment's actual return will be different ...
  6. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
Related Articles
  1. Options & Futures

    How To Avoid Closing Options Below Intrinsic Value

    To get the best return possible on your options trading, it is important to understand how options work and the markets in which they trade.
  2. Options & Futures

    Dividends, Interest Rates And Their Effect On Stock Options

    Learn how analyzing these variables are crucial to knowing when to exercise early.
  3. Options & Futures

    Using Options Tools To Trade Foreign-Exchange Spot

    Find out how delta, gamma, risk reversals and volatility can all help predict movements in the cash market.
  4. Options & Futures

    Do Option Sellers Have a Trading Edge?

    Take a look at a study that discovered that three out of every four options expired worthless.
  5. Options & Futures

    4 Reasons To Hold Onto An Option

    There are times when an investor shouldn't exercise an option. Find out when to hold and when to fold.
  6. Options & Futures

    Options Hazards That Can Bruise Your Portfolio

    Learn the top three risks and how they can affect you on either side of an options trade.
  7. Options & Futures

    Understanding Option Pricing

    Take advantage of stock movements by getting to know these derivatives.
  8. Options & Futures

    5 Secrets You Didn't Know About Roth IRAs

    Between its generous tax benefits at retirement and no required minimum distributions, a Roth IRA is well worth considering if you're eligible to have one.
  9. Forex Strategies

    The 10 Riskiest Investments

    Investors seeking high returns must also be prepared for high risk. Here are ten of the riskiest investments available.
  10. Options & Futures

    Trade Covered Calls On High Dividend Paying Stocks

    We explain the risks, rewards, timing, and profit and loss considerations for covered calls with dividend stocks.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center